BHP Billiton blasts Canadian government as it pulls $38bn PotashCorp bid

BHP Billiton has launched a scathing attack on the Canadian government after
it formally withdrew its $38bn (£23.5bn) bid for Potash Corporation of
Saskatchewan.

BHP Billiton said that it had committed $820m of investment into the Canadian regionPhoto: EPA

By Helia Ebrahimi

12:12AM GMT 15 Nov 2010

Shares in the London-listed miner fell 0.93pc to £23.40 on Monday morning after the company, which will have to write off $350m of costs relating to the aborted deal, said it was pulling its offer because it could not satisfy Canada’s overly stringent demands.

In a pointed statement that is likely to trigger a row over Canadian protectionism, BHP listed a stack of concessions it had made to satisfy Ottawa.

The miner said that it had committed $820m of investment into the region, that it would increase employment by 15pc and relocate 200 people from the US, as well as spend $8m a year on community projects. It had also promised a Toronto listing, accepted it would forgo a $1.5bn tax rebate and agreed to a controversial legal cartel for five years.

BHP claims it even offered a position on its board to a Canadian representative and made a $250m bond available to the government to ensure it kept its promises after agreeing to “an unprecedented monitoring and compliance regime.”

BHP, headed by Marius Kloppers, was defiant about its efforts to appease the Canadian government about the “net benefit” the company would deliver to the region.

“BHP Billiton continues to believe its offer would have resulted in a significant net benefit to Canada, Saskatchewan and New Brunswick,” the company said.

“As a package, the proposed undertakings offered by BHP Billiton in a signed, written submission to the Minister of Industry were unparalleled in substance, scope and duration, reflecting the importance of potash to Canada and Saskatchewan.

“The company had offered to commit to legally-binding undertakings that would have, among other things, increased employment, guaranteed investment and established the company’s global potash headquarters in Saskatoon, Saskatchewan.”

A fortnight ago the federal Canadian government rebuffed BHP’s bid and gave the company 30 days to improve its offer and persuade Ottawa that its bid should proceed.

BHP said, however, that it believed “the Minister of Industry would have required additional undertakings beyond those BHP Billiton had already offered which would have conflicted with BHP Billiton’s business strategy and been counter to creating shareholder value”.

Mr Kloppers, who was described in the statement as “disappointed at the outcome” said: “Unfortunately, despite having received all required anti-trust clearances for the offer, we have not been able to obtain clearance under the Investment Canada Act.”

It is the third major setback for the deal-hungry BHP chief, who failed to buy rival Rio Tinto and subsequently was also stymied in his efforts to set up a iron-ore joint venture with the same company.

BHP Billiton said it would now revert to handing cash back to shareholders via a share buy-back, reactivating the remaining $4.2bn component of its previously suspended $13bn buy-back programme.

The company will take the $350m hit in its interim accounts next month – $250m of which is in relation to the $45bn acquisition financing of the abortive deal.

BHP’s withdrawal of its Potash bid will intensify fears that Canada is becoming increasingly protectionist at a time when the country’s pension funds are snapping up assets abroad. Such international overtures have included this month’s £2.1bn deal for a 30-year concession for the fast rail link from London to the Channel Tunnel and the £389m acquisition of National Lottery operator Camelot in March.